JMT
You ask some good questions. You would think that GMAC
would buy all the "good stuff," but CMO states they expect
the sale to produce a modest gain, so I don't see much
write-down of assets from the sale. To me, the downside of
the sale is in a more limited upside for the stock, but
of course I believe there is PLENTY of upside left. It
is just that if you bought in at $20.00, I wouldn't be
holding my breath in expectations of getting all my money
back anytime soon.
Assets and Book Value
Yes, there exists preferred stock and there may be
some further degradation of assets this quarter, so I
am not sure that the book value is as high as 9, but
I think we are all fairly confident that it is well
north of $4.00 with lots of cash.
CMO states "by year-end the companies mortgage investments
will consist almost exclusively of 2.2 billion of Fannie
Mae, Freddie Mac, and Ginnie Mae securities financed by
approximately 2.1 billion of short-term borrowings." I
am by no means an expert on this subject, but this does
not sound too high risk to me.
And I agree with James, when a company has lots of cash,
good things usually happen. CMO management screwed the
pooch on their leveraged interest rate bet, but they did
keep the company afloat, and I think they are competent
enough to find a good use for the money.
MC |
